The five new board members are George F.J. Gosbee, chairman and president of Tristone Capital; Douglas Steenland, former CEO of Northwest Airlines; Scott Stuart, a founding partner of Sageview Capital; Ronald L. Thompson, chairman of the board of trustees for Teachers Insurance and Annuity Association; and Stephen Wolf, chairman of R.R. Donnelley & Sons Co.

“The formal creation of our board of directors is another important step toward building a viable Chrysler Group for the long term,” said C. Robert Kidder, Chrysler’s acting chairman in a statement.

Fiat CEO Sergio Marchionne is currently determining which vehicle models the company will continue to produce and where production will occur.

Chrysler’s sales dropped 42 percent in June as its overall market value fell 28 percent. In addition to the five new board members, Marchionne; Alfredo Altavilla, CEO of Fiat Powertrain Technologies; and James Blanchard, the former Michigan governor who was appointed to represent the interests of a United Auto Workers union health-care trust fund, complete Chrysler’s new board.

The U.S. government had an active role in selecting the new board members, including appointing Kidder, Steenland, Stuart, and Thompson.

Board members Liddy, Dennis Dammerman, George Miles, Suzanne Nora Johnson, and Morris Offit were re-elected. Liddy, who said last month he will step down as CEO as soon as a replacement takes over, has said he also plans to resign as chairman and that the two posts should be split.

AIG hired executive search firm Spencer Stuart to find the next CEO, two people familiar with the situation told Bloomberg. Thomas Neff, U.S. chairman of the recruiting firm, is involved in the search.

KB Home Chairman Stephen Bollenback, AIG’s lead independent director; Harvard University professor Martin Feldstein; and James Orr, whose reappointment was opposed by unions because of his role on the compensation committee.

“Goodbye and good riddance,” said shareholder Kenneth Steiner when the meeting was opened to questions from investors.

AIG plans to reduce its debt under a Federal Reserve credit line by $25 billion by passing down stakes in two non-U.S. life insurance units.

AIG has received a total of four bailouts, totaling $182.5 billion, after agreeing in September to turn over a majority stake in the company to the U.S. government.

“We believe there is an excellent chance that we can repay the government,” Liddy said. “The government is not prepared to make any adjustments” to the arrangement that turned over majority control to the U.S., he said. “My hope would be that as we make progress in the overall restructuring, that maybe those conversations will bear fruit.”

AIG has disclosed transactions raising about $6.7 billion. “We have determined the destinies of nine of our major businesses spanning everything from life insurance in Taiwan to global real estate, and have specific plans for each of those nine,” Liddy said. “We expect this process to advance steadily in the next six months, and may involve public offerings.”

But beneath all of these details are fundamentals even more important than the hot topics of the day.

In the last issue, I called your attention to NACD’s “Key Agreed Principles to Strengthen Corporate Governance for Publicly Traded Companies.” Now it’s time to build on them. NACD, America’s membership organization for directors, is announcing “A Challenge for Corporate Directors: Renew Commitment to Corporate Governance and Oversight Excellence.”

I recognize that the majority of our membership is performing well, but the recent financial-sector collapse has diminished public and investor confidence in publicly traded companies and we must all make a renewed commitment to corporate governance and oversight excellence.

NACD is challenging not just our 10,000 members, but every board and individual director to lead the charge in improving board performance and corporate oversight by strengthening governance in boardrooms across the country. And it begins with assessing current performance and taking measures to improve.

This campaign is a call to action to urge all boards to assess their current performance. We urge boards to:

• Embrace NACD’s Key Agreed Principles and use them as a framework for determining board practices and as a tool that can be adapted to each board’s specific needs

• Assess the board’s practices with an emphasis in four critical areas: executive compensation, risk oversight, corporate strategy, and transparency

• Commit to continuous director education and knowledge exchange around NACD’s Key Agreed Principles and leading practices that have been identified by NACD white papers

• Provide greater transparency by annually sharing board progress on these commitments

NACD will report on the progress of U.S. boards that have accepted this challenge on a quarterly and yearly basis.

It is time for directors to embrace their responsibility on corporate boards and lead this charge. To learn more and participate in the campaign, visit www.nacdonline.org today. The time is now.

The project will run tandem to a commission the CII agreed to form with the CFA Institute. Expect leading CII funds to advocate for at least three market-wide changes: easier shareowner rights to nominate corporate directors (”access”), say-on-pay votes to align CEO pay with performance, and a swift end to broker voting, which can skew ballot outcomes, according to GPW.

The voice of the shareowner hasn’t been heard much in the scrum over how to rescue U.S. financial markets. That’s partly because investors as a group hve never developed heavyweight political clout. It’s also because the CII,, the chief shareowner group in the U.S., is a jigsaw of corporate, labor, and civil pension funds that don’t always agree with each other. But the crisis has galvanized the CII into action.

At its semi-annual meeting in Chicago, some council members also proposed issuing an urgent collective letter on the financial bailout to ensure that the shareowner perspective forms part of political and regulatory agendas in Washington.

Large funds such as the California Public Employees’ Retirement System (CalPERS) are planning to coordinate its own separate efforts.

The CII also took its first major steps to globalize. Its international committee decided in Chicago to build website profiles of issues, groups, and contacts in major markets as a resource for CII meetings. And it is considering a formal liaison with the International Corporate Governance Network, which the CII helped to create 14 years ago.

Eventually, the CII may engage individual companies in other markets on governance failures, as it does at home. The international panel is headed by Florida State Board of Administration Mike McCauley and Sara Lee general counsel Margaret “Peggy” Foran.

The Wall Streeet Journal, citing the Congressional Research Service, reports that the average pay for CEOs was more than 180 times average worker pay, up from a multiple of 90 in 1994.

Total direct compensation for CEOs was a median $8.8 million, counting salaries, bonuses and other incentives, as well as the value of restricted stock, stock options and other long-term incentive awards at the time they were granted, according to a survey by the Hay Group of 200 major U.S. companies.

“If you’re a plant manager and you have a good year, you can take a vacation, but if you’re a CEO with options, you can cash out in a good year and then you and your children are set for life,” says Peter Cappelli, a management professor at the Wharton School. “What angers employees the most is knowing that the top boss has this plus a whole lot of other perks they won’t ever have, like a plusher health-care plan and a company car and driver.”

“The key relationship is the one between the CEO andtop 25 managers of the company, because that’s the key team,” GeneralElectric CEO Jeffrey Immelt has said in recent interviews. “Should theCEO make five times, three times or twice what this group makes? That’sdebatable, but 20 times is lunacy,” he added.

Immelt last year received $3.3 million in basesalary, $5.8 million in bonus and $396,267 in other compensation, aswell as other plan-based awards valued at $4.7 million at their grantdate. His compensation, he has said, was in “the two to three times therange” of GE’s other 25 top executives.

]]> http://www.directorship.com/growing-wage-gap-a-gnawing-problem/feed/ 0 http://www.directorship.com/-a-new-judicial-perspective/ http://www.directorship.com/-a-new-judicial-perspective/#comments Thu, 01 Jan 1970 00:00:00 +0000 Charles Elson http://www.directorship.com/?p=4375 THE LAST DECADE HAS brought a virtualrevolution in expectations for corporate directors. The common view hasbeen that such changes stem primarily from heightened shareholderactivism and new government mandates such as the Sarbanes-Oxley Act.But among the most intriguing developments in the governance landscapeis the shift in perspective by the Delaware judiciary.

Just a decade ago, the Delaware courts gave a wideberth to managers and directors caught up in corporate disputes. Thiswas particularly noteworthy in the takeover arena. The theory held thatmost shareholders were simply unsophisticated investors who neededprotection from their own lack of knowledge and business acumen. At thesame time, managers were viewed as paternalistic fiduciaries wellpositioned to protect the corporation and its stockholders.

On the basis of these assumptions, the balancebetween managerial prerogative and investor control was tilted clearlytowards the managers for the better part of two decades. The Delawarecourts decided numerous cases in the 1980s and 1990s that consistentlyupheld board decisions to turn down the sale of a business to anunwanted suitor, even one that offered a significant premium over themarket price of the stock. Whether it was upholding poison pills orsimply allowing a board to “just say no” to a surprise bidder, thecourts seemed to view shareholders as unthinking children who requiredthe intervention of protective corporate parents.

Consequently, in the “go go” merger era of the’80s and ’90s, the Delaware courts rarely overturned the decisions ofcorporate management and their often rather subservient boards, evenwhen confronted with substantial shareholder objections.

All of this has now changed. One key factor hasbeen the visible acknowledgment from the judiciary that in an era oflarge, financially sophisticated institutional investors, shareholdersare perfectly capable of making informed judgments about theirholdings. This “shareholder is smart” view initially surfaced in a 2000decision involving a challenge to an anti-takeover action taken by theboard of Shorewood Packaging. The court ruled in favor of the potentialacquirer, Chesapeake Corp., finding that if shareholders are viewed assmart enough to know when to invest, they should be viewed in a similarmanner when it comes to their decision to exit the investment throughthe sale of the enterprise.

William Chandler, one of Delaware’s mostinfluential judges, set the judicial agenda again this February with astrongly worded opinion on backdating that may open the door to a floodof shareholder derivative lawsuits. Typically, the courts haven’t beenfriendly places for shareholder challenges to executive compensationpractices. But in a case involving Maxim Integrated Products, the judgeallowed the action to go forward.

His harshly worded decision signaled a new viewabout judicial faith in board decision-making: “Based on theallegations of the complaint and all reasonable inferences drawntherefrom, I am convinced that the intentional violation of ashareholder-approved stock option plan, coupled with fraudulentdisclosures regarding the directors’ purported compliance with thatplan, constitute conduct that is disloyal to the corporation and istherefore an act in bad faith.”

The message here is clear: Boards today must givedeference to shareholder views in ways that were unheard of 10 yearsago. In this new era, the Delaware courts can no longer be seen asreflexive defenders of managerial privilege. Dossier The Courts June/